The House and Senate both returned for legislative session last week and were busy advancing several pieces of legislation that would improve the operating environment for Pennsylvania businesses.
Both the House and Senate Labor and Industry and Industry committees met last Wednesday and considered legislation important to employers.
The Senate L&I Committee unanimously passed S.B. 1319, which was introduced by Senator Dave Argall (R-Schuylkill) in response to unfair unemployment compensation tax increases that have been imposed on certain employers as a result of a pandemic-related shutdown. In general, employers can qualify over time for lower UC taxes by avoiding layoffs; however, under current law, an employer who reports no payroll in one of the last three years reverts back to the default tax rate. This policy has unfairly impacted around 2,700 employers who were compelled to shut down during the pandemic and S.B. 1319 provides a targeted, temporary exemption so these employers can maintain the positive experience rating they earned. This bill now awaits consideration by the full Senate.
The House L&I Committee met on Wednesday as well and also took up the UC tax issue by amending the language contained in S.B. 1319 into another UC bill (S.B. 1083), which now awaits consideration by the full House. It is generally expected that, should the General Assembly agree to advance this legislative fix, S.B. 1083 is likely to be the vehicle.
The House L&I Committee also considered S.B. 319, legislation introduced by Senator Camera Bartolotta (R-Washington) and supported by the PA Chamber to address a PA Supreme County decision that is driving up workers’ compensation costs on employers.
The Court’s decision in the 2018 Whitmoyer case disrupted the process known as subrogation in which employers may be reimbursed for certain expenses if a third party is found liable for the injury and pays a settlement. This policy and process had been in place for over 100 years before the Court’s surprising decision. The Court cited a technicality in the law, as opposed to any substantive objection to the policy itself, and S.B. 319 makes the technical correction to return the law to the 100-year standard that was in place. The bill passed committee and is now pending before the full House.
Last week, the state Senate Finance Committee also passed a series of tax reform bills supported by the PA Chamber that, if enacted, will simplify the tax code, improve efficiency and clarity, and help to improve the Commonwealth’s business climate and competitive standing.
A repeal of the Accelerated Sales Tax (AST) pre-payment requirement, H.B. 2277, would simplify a complicated and inconsistent aspect of the Commonwealth’s tax code. Under current law, Pennsylvania businesses are required to remit “prepayments” for their sales tax collections. This legislation removes that requirement and allows businesses to remit collected sales tax revenues in accordance with their filing period. House Bill 2277 passed unanimously out of committee and passed the House by unanimous vote back in June. The bill is currently in Senate Appropriations.
S.B. 1320 would allow Pennsylvania partnerships or s-corps to elect to recognize income from the operation of the business at the entity-level as opposed to the existing pass-through methodology for income tax purposes. The Tax Cuts and Jobs Act (TCJA) imposed a $10,000 limit on the maximum deduction taxpayers may claim for certain state and local taxes through 2025. Senate Bill 1320 would shift state tax liabilities for pass-through entities’ (PTEs) income from the individual back to the PTE, providing relief to owners and shareholders. If the election is made, the partnership or s-corp owners and shareholders would receive a credit, equal to the amount of income taxes paid by the business entity, against state income tax liabilities. The legislation passed out of committee along party lines and is designated for second consideration in the Senate.
Many businesses have seen a significant increase in the amount of employees choosing to work from home a few days a week post COVID-19. S.B. 1315 provides relief to out of state companies via an exemption from triggering the CNIT for their employees who are residents of Pennsylvania and work remotely (or work from home) less than 50% of their normal working hours on an annual basis. Senate Bill 1315 passed out of the Senate Finance Committee along party lines and is now in Senate Appropriations.
H.B. 2057 is a comprehensive package of reforms and updates to Pennsylvania’s Business Corporation law. It provides a number of reforms intended to improve efficiency and clarity in range of areas including filings with PA Department of State, corporate bylaws and rules regulating Boards of Directors. House Bill 2057 passed unanimously out of committee and is currently in Senate Appropriations.